Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in PersonalWeb Technologies LLC v. Patreon, Inc., No. 2019-1918 (June 17, 2020). The Court held that PersonalWeb’s prior patent infringement suit against Amazon barred re-litigation of the same claims against Amazon’s customers.
PersonalWeb sued Amazon in the Eastern District of Texas in 2011, alleging that Amazon’s S3 web-hosting product infringed five patents covering database technology. After claim construction, PersonalWeb stipulated to the dismissal of its claims against Amazon with prejudice. In 2018, PersonalWeb filed dozens of lawsuits asserting the same patents against customers using Amazon’s S3 product. These suits were consolidated in the Northern District of California, where Amazon filed a declaratory judgment action seeking an order that the customer suits were barred due to the prior Texas lawsuit. The district court held that claim preclusion barred claims for infringement occurring prior to the final judgment in the Texas lawsuit, and that the Kessler doctrine barred claims for infringement occurring after the final judgment in the Texas lawsuit. PersonalWeb appealed.
The Federal Circuit affirmed. The Court rejected PersonalWeb’s contention that the Texas case involved a different feature of the S3 product and, therefore, a different cause of action rendering claim preclusion inapplicable. The Court explained that distinct arguments in support of liability “do not all constitute separate claims,” and that “a party may not split a single claim into separate grounds of recovery and raise those separate grounds in successive lawsuits.” The Court held all the lawsuits were directed to the same cause of action because they all involved the same accused S3 product. As such, claim preclusion applied.
The Court also rejected PersonalWeb’s contention that, because infringement was not “actually litigated” in the Texas lawsuit, the Kessler doctrine should not apply. The Court noted the Kessler doctrine “fills the gap” left by claim and issue preclusion by “allowing an adjudged non-infringer to avoid repeated harassment for continuing its business as usual post-final judgment.” The Court explained that the Kessler doctrine grants a limited trade right attached to a product itself, which is “not limited to cases involving a finding of non-infringement that was necessary to the resolution of an earlier lawsuit.” The Court held, therefore, that the stipulated judgment in the Texas case prevented subsequent infringement suits against Amazon’s S3 product regardless of whether those challenges were directed at Amazon or at its customers.